So why, if everyone is telling us that the oil price is going up, are rental taxes, sorry fees, being applied? Don’t get me wrong, fiscal reform is necessary, but if oil is going back up, let us give the common man a breather. Here’s an idea – let’s start with taxing everyone who has a monopoly agency. You know, the rich.
Speaking of announcements, I would like to introduce a new statistic, similar in importance to GDP, CPI (inflation), the unemployment rate, etc. I call this statistic the Reality Based Ratio. It is the ratio of the number of projects announced to the number of projects completed. Of course this needs to be adjusted for size of project and time needed to complete, but you get the idea. The higher the ratio, the lower the reality basis of the economy. People need to stop applauding projects announced and start applauding projects completed. Well, they don’t need to, they just should if they want any sort of economy in the future.
The recent visit by Britain’s chancellor to meet UAE businesses and the recent BP-Adco deal show the UK’s fast, assertive move to build bilateral financial ties with the world as it turns from the EU. This is a tremendous opportunity to strengthen the UAE’s global position in the world financial markets. If Donald Trump follows up with his promise to reduce American trade and the US turns inwards, there will be further opportunities for the UAE to build bilateral financial bridges.
This will give the ADGM and the DIFC the chance to move out of Singapore’s shadow and become true regional and global financial hubs. They can do this if they learn to stop being regulatory and legal centres and become truly commercially focused. More than 50 per cent of their boards and executives should be non-government and non-regulatory, but private businessmen and investors, if they are to have the right experience to steer these projects to global success.
ADGM and DIFC can stop working on building office space and retail outlets, and use the money to create start-up incubators. Tasteful restaurants, enjoyable as they are, do not help the economy. Don’t tell me how many existing companies open in your free zone. Tell me how you have supported local companies in growing. An international asset manager opening in a UAE free zone adds near zero value to the UAE economy, its citizens and residents. Convincing local SWFs to move to a free zone similarly misses the point, as they don’t manage third-party money so the regulation is meaningless, and business service revenue paid into the federal economy is hijacked by the free zone. Instead, tell me how many venture capital companies investing locally you have attracted. Oh, sorry, if they are based in your free zones then they cannot transact locally. I forgot.
Investing in the local start-up and venture sector is not just for the government.
Super large private equity companies such as Abraaj Capital and Gulf Capital made their money based out of the UAE and have grown to billions of dirhams, but there is no material reinvestment into local start-ups. No venture capital funds.
Where are we investing our money? We talk a big game about SMEs, entrepreneurship and innovation. But we’re building superyacht marinas. Did Santa hand out superyachts to the UAE while I wasn’t looking? Why don’t we have new venture capital funds? Why don’t we use the cash to support our start-ups and SMEs? Oh, and if you made your money here, mostly as a government official, kindly invest your money here.
Why don’t we have 50 regional venture funds each seeded with a billion dollars funded by liquidating one of our several mammoth SWFs? And let’s have entrepreneurs run these venture funds. They, at least, are willing and able to take risks. Capitalism works, if you allow it to.
This article was originally published in The National.